1. Equal pay audits: draft regulations published for implementation on 1 October 2014

The Government has published its response to last year's consultation on the proposal to require tribunals to order equal pay audits where an employer loses an equal pay case.  Draft regulations have been published to take effect on 1 October 2014 (subject to the parliamentary affirmative resolution procedure) and will apply to equal pay claims presented on or after that date.

Tribunals must not order an audit if the employer has already carried out a qualifying audit within the preceding three years, the action required to avoid equal pay breaches is clear without an audit, there is no reason to think there may be other breaches, or the disadvantages of an audit outweigh the benefits.  There are also exemptions for existing micro-businesses and new businesses.

The audit must include pay information for men and women for the categories of employees and period specified by the employment tribunal, the pay difference and reasons, the reason for any potential equal pay breach identified, and the employer's plan to avoid equal pay breaches. The tribunal will set a date for the audit to be completed which must allow the employer at least three months. The tribunal will determine whether an audit is compliant and, if not, order this to be rectified; it can also impose a penalty for £5,000 for each failure to comply with an audit order.

Significantly, the Government appears to have backtracked on its original decision not to require employers to publish the results of their audits generally, but only to the employees subject to the audit. The draft regulations require publication on the employer's website for at least three years (save to the extent it would involve a breach of a legal obligation), together with a requirement to inform all employees covered by the audit where they can obtain a copy. Our enquiries have confirmed that, despite the ambiguous commentary in the response, the drafting does indeed reflect a change in policy to require publication on an external website and not just an intranet;  no doubt this wil be discussed by ministers in the forthcoming parliamentary debates. Clearly employers will need to factor this into decisions on settlement of claims and on whether to conduct a voluntary audit. The financial penalty provision does not apply to a failure to publish the audit, but non-compliance with a tribunal order would be contempt of court.

The Government does not propose publishing its own guidance on audit requirements, instead pointing to EHRC good practice guidance on how to carry out an equal pay audit.

2. Flexible work requests: new regime in force

As covered in our May ebulletin, a new regime for flexible work requests came into force on 30 June 2014. Our HSF briefing available to clients provides a detailed look at the new regime and the issues surrounding the handling of requests – please click here to request a copy.

3. Legislative reform: whistleblowing, zero hours and other changes

Following proposals outlined in the Queen's Speech, the Small Business, Enterprise and Employment Bill has now been published. It includes the following reforms:

  • a ban on exclusivity clauses in zero hours contracts (and power to make further regulations in relation to zero hours workers). So far this is the main response to the Government consultation on zero hours contracts, with the Government deciding to consult further on how to prevent rogue employers getting round the ban, remedy and a code of practice on the fair use of zero hours contracts (to be published by the end of 2014). The ban will be of no assistance to workers who are not subject to an express exclusivity clause but who nevertheless fear reprisals if they do look for other work; this issue may presumably be addressed in the code of practice. Continued focus on this issue means that employers using zero hours contracts may wish to review their use to check it is appropriate, that statutory entitlements are granted, and that the position of such workers is properly communicated.
  • power to make regulations to require persons who are prescribed for whistleblowing purposes to produce annual reports of the disclosures made to them, but without identifying the workers or employers involved. This measure was announced in the Government's response to its call for evidence on potential whistleblowing reforms, along with proposals to extend protection to student nurses and publish guidance (but no other significant legislative amendments). See our blog for further details.
  • new financial penalties for unpaid employment tribunal awards or Acas-conciliated settlements (capped at £5,000)
  • power to make regulations to restrict the number of times an employment tribunal can be postponed or adjourned and allow costs orders for a late application to postpone or adjourn
  • the maximum £20,000 penalty for breach of the national minimum wage will apply in respect of each underpaid worker separately
  • amendments to the Companies Act in respect of directors: prohibiting corporate directors, requiring companies to keep a public register of people with significant control over them, extending directors' duties to shadow directors, and creating new grounds for director disqualification including conviction of certain overseas offences
  • provisions for the repayment of exit payments made to public sector employees and office holders if they return to work for the public sector within a certain period.   

4. Disability: scope of duty to make reasonable adjustments

  • The Court of Appeal has confirmed that neither EU nor UK law impose on an employer a duty to make reasonable adjustments for disablity to accommodate an employee's need to care for a disabled dependent. The duty is owed only to disabled employees, not employees who are associated with someone with a disability. (Hainsworth v Ministry of Defence)  

This ruling is relevant to requests to work flexibly. Of course employers receiving such requests need to avoid direct discrimination on grounds of association with a disabled person, and indeed other forms of direct discrimination. In some circumstances refusal might amount to indirect sex discrimination, and there will also be employee relations considerations. Our briefing on the new flexible work regime discusses these issues (see above). 

  • The EAT has ruled that employers are not under any duty to disabled employees to make reasonable adjustments by modifying trigger periods for warnings under a sickness absence policy. (Griffiths v Secretary of State for Work and Pensions) Although this decision is helpful to employers, it should be treated with caution as it conflicts with another EAT ruling (HMRC v Whiteley). The EAT here appeared to conclude that there was no disadvantage because the policy was applied equally to non-disabled employees, failing to recognise the disadvantage arising from the higher level of absence associated with disability.   

5. Resignation without notice: deduction from pay lawful

The EAT has ruled that it was not an unenforceable penalty for a contract to include a clause deducting a payment equal to the salary for the period of notice not worked when a highly skilled employee resigned, as this was a genuine pre-estimate of the losses that would be incurred in replacing the employee at short notice. The ruling supports the use of such clauses for highly skilled employees, but the EAT was at pains to warn that it should not be regarded as a precedent for the future as cases will be fact-specific.

Clauses should also be drafted carefully, ideally to establish a clear link between the amount of the payment and the expenses of recruitment due to early termination. Depending on the drafting, a clause linking the amount of the deduction directly to unworked notice might well be construed as intended only to provide that the employee would not be paid for any unworked period of notice (this was not argued by the parties in this case). (Li v First Marine Solutions)

6. Statutory holiday: payment in lieu on employee death

The ECJ has ruled that, when a worker dies after a period of sickness preventing them taking their accrued holiday, payment in lieu of the accrued entitlement under the Working Time Directive must be paid to the deceased worker's estate. (Bollacke v K + K Klaas & Kock)

7. EU legislation update: board diversity and pregnant workers

  • The President of the Council of Ministers has issued a Progress Report confirming that there is not yet consensus on passing the EU Gender Directive to address gender balance on corporate boards. See our blog for further details. 
  • Employers already facing changes to UK laws on family leave from 2015 will welcome the news that the European Commission has withdrawn proposals to amend the Pregnant Workers Directive. These proposals included the extension of compulsory leave (with entitlement to bonus in respect of this period) from 2 to 6 weeks, 20 weeks' full pay maternity pay, 2 weeks' full pay paternity leave and breaks for breastfeeding.   

8. New publications

HRMC has updated guidance on IR35 concerning the use of intermediaries such as personal service companies.